FAQs on TDS under Section 194Q of Income Tax Act
Ques 1: Whether Section 194Q of Income Tax Act is applicable to services also?
Ans: No, Section 194Q of Income Tax Act is not applicable to services. Section 194 Q is applicable to goods only
Ques 2: Section 194Q of Income Tax Act is effective from 1st July 2021. Whether purchases made during the period starting from 1st April 2021 to 30th June 2021 will be considered for computing the limit of Rs. 50 Lakhs.
Ans: Yes, according to Section 194Q, purchases made during the previous year, so purchases made during the period starting from 1st April 2021 to 30th June 2021 will be considered for computing the limit of Rs. 50 Lakhs.
Ques 3: At what time buyer has to deduct TDS under Section 194Q of Income Tax Act?
Ans: Abstract of Section 194Q of Income Tax Act ,” at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier,”
This provision is almost similar to other sections of TDS.
For example: Mr. Sagar received an invoice of Architect of Rs. 70,000. Out of this Rs 70000 , Mr. Sagar has already paid an advance of Rs.40,000. In this scenario, Mr. Sagar would have been deduct TDS on Rs. 40000 at the time of advance under section 194J and on remaining Rs. 30000 , Mr. Sagar will deduct TDS at the time of credit of such sum to the account of the payee, i.e., at the time of booking of the invoice. In the same way, under Section 194Q of Income Tax Act also TDS will be deducted not only on purchase of goods but also on advances also.
Ques 4: Whether TDS under Section 194Q of Income Tax Act will be deducted on taxable value or invoice value?
Ans : As under other sections of TDS , TDS is deducted on taxable value only (means excluding GST). So, one can easily deduct TDS under Section 194Q of Income Tax Act taxable value until and unless any clarification comes from Income Tax Department. (alternatively, on a conservative side one can also deduct TDS on invoice value means including GST, it will only result in little bit more blockage of working capital and no other loss)
Ques 5: What will happen if Section 194Q and Section 206C(1H) both are applicable?
Ans: Where both Section 194Q and Section 206C(1H) are applicable (kindly read Comparison Chart between Section 194Q And Section 206C(1H) of Income Tax Act) then Section 194Q prevails. Therefore, as soon as section 194Q get applicable on buyer then it should not happen that seller collect TCS under section 206C(1H) and buyer deduct TDS under Section 194Q of Income Tax Act, so, buyer should immediately intimate the seller that now he will deduct the TDS under Section 194Q of Income Tax Act.
Ques 6: What are the extra compliance burden of buyer to whom Section 194Q of Income Tax Act applicable?
Ans: The person responsible for deducting /collecting TDS/TCS should obtain the following details:
- Last Year turnover
- Acknowledgment no. & date of filing of ITR of last two years.
- Total TDS & TCS deducted/collected during each of last two years.